Seagate to Acquire STEC?

Seagate is in the market for an enterprise SSD maker, according to a report—and that could mean that STEC is in play.

Seagate chief financial officer Pat O’Malley told Reuters on Monday the company would be interested in buying an SSD maker that has a “significant” share of the enterprise market.

“We look at all technology product providers (for M&A) but what I would say is that on the enterprise SSDs, there’s probably only one of them that really makes any significant money,” he told the wire, in response to a question about Seagate’s interest in OCZ Technology.

Seagate has been rumored to be interested in OCZ Technology, which began life as a designer of high-end enthusiast products such as memory modules before moving into the solid-state disc business. However, OCZ generally plays in the PC market, whereas STEC has focused on designing enterprise-class SSDs for server OEMs.

Granted, there’s no confirmation that O’Malley was specifically referring to STEC, although it would seem to be the most likely candidate. (Or could O’Malley be referring to Intel’s own SSD business?)

If Seagate is interested in STEC, the time to buy might be now. On May 8, STEC reported a first-quarter loss of $10.7 million on revenues of $50.4 million; revenues fell 46.9 percent from a year ago. STEC’s chief executive Manouchehr Moshayedi said he believes that the quarter represented a “trough period,” with more customers qualifying their products in the current second quarter and in the third quarter. STEC will announce its second-quarter results August 7.

One of the problems that any SSD vendor faces in the enterprise is simply the capacity-per-cost equation, which pales in comparison to traditional rotating storage. In a recent interview, John Engates, the chief technology officer at Rackspace, said SSDs made sense for higher-demand workloads. “We’ll continue to use more SSDs as the price comes down,” he said, “and the capacity comes up.”

In the meantime, Seagate is apparently preparing to enhance its SSD offerings; during a conference call on Monday, Seagate announced that Gary Gentry, the former general manager of Micron’s enterprise SSD business, would be rejoining Seagate as head of Seagate’s SSD business.

In December, Seagate agreed to buy Samsung’s storage business, which included magnetic and solid-state technology. Seagate chief executive Stephen Luczo told analysts that the partnership with Samsung had progressed “on plan” and a “highly-competitive Tier 0 product” would sample this quarter. Luczo added that he views the enterprise SSD as a “2015 product.”

Seagate also made a strategic investment in DensBits technology, and the two companies are jointly developing a next-generation solid state controller technology with DensBits.

“DensBits, I think, is a—is really an indication of what I would say next, next generation,” Luczo said. “It’s really about a controller technology that has the potential for significantly reducing the overall cost of the flash in both enterprise and client applications. And we’re hard at work with them.”

“We haven’t disclosed yet when we expect to deliver a jointly developed technology,” he added, “but we’d probably be talking to that more specifically in the September analyst meeting.”

The problem for SSDs centers on write performance and write endurance—leading Seagate to promote rotating magnetic drives on one end and SSDs on the other, with a hybrid drive (relying on a small amount of flash memory as storage for frequently accessed data) between the two.

“It’s one thing to dump something down on a memory stick, and it’s another to be really maintaining your corporate data in it,” Luczo said of enterprise SSDs.


Image: Oleksiy Mark/